The domestic auto industry, especially electric vehicles (EV), got a major fillip in the interim budget presented by the Finance Minister Nirmala Sitharaman on February 1.
Apart from announcing its plans to expand and strengthen the electric vehicle (EV) ecosystem in the country by supporting manufacturing and charging infrastructure, the government increased the budget outlay for automakers and auto component players by 750 percent to Rs 3,500 crore under the production-linked incentive (PLI) scheme for next fiscal.
As per the government’s budget allocation document published on February 1, the allocation for the scheme has been raised from Rs 483.77 crore in 2023-24 to Rs 3,500 crore for 2024-25. In addition, the budgetary outlay for the PLI scheme for advanced chemistry cell (ACC) battery storage has increased 20 times to Rs 250 crore in FY 2024-25 from Rs 12 crore last year.
The entire budget for the next financial year will be presented in July this year once the new government is formed after the Lok Sabha elections.
It may be recalled that in FY 2021, the Ministry of Heavy Industries approved the output-linked incentive scheme with a budgetary outlay of Rs 25,938 crore for five years with the objective of boosting domestic manufacturing of advanced automotive technology (AAT) products and attracting investments in the automotive manufacturing value chain.
While the incentives were applicable on determined sales value from the financial year 2022-2023 to 2026-2027, the tenure of the PLI Auto scheme extended by one year to March 31, 2028.
As part of the scheme, 18 companies under 'Champion OEM' category including Maruti Suzuki, Tata Motors, Hero MotoCorp, Bajaj Auto, and Ola Electric, and 67 companies under 'Component Champion' category have been approved. While total investments to the tune of Rs 67,690 crore are estimated to be made under the scheme, Rs 11,958 crore have already been pumped in till Q2 FY24.
While Tata Motors and Mahindra & Mahindra have secured domestic value certificates from Automotive Research Association of India (ARAI), Ola Electric was the most recent player to receive it from the homologation agency under the PLI scheme for the automobile and auto component industry.
Anurag Singh, Managing Director, Primus Partners said, “We believe the scheme will now focus more on public mobility than personal mobility. The overall stability in policy direction is beneficial for the industry, and we find this budget to be reasonable.”
According to ICRA, the disbursement of funds under PLI schemes (enhanced budgeted outlays for both automobiles/components as well as advanced chemistry cell battery storage) would support cash flows and credit metrics for the Automotive OEMs and ancillaries.
Shamsher Dewan, Senior Vice President & Group Head - Corporate Ratings, ICRA, said, “ With enhanced outlays, PLI scheme aims at fast tracking investments in technology and will also increase localisation of auto components, accelerate investments towards a local EV ecosystem.”
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